{"id":67802,"date":"2025-02-04T12:14:28","date_gmt":"2025-02-04T12:14:28","guid":{"rendered":"https:\/\/peraltafinancing.com\/airline\/frontier-and-spirit-really-want-to-merge-but-they-cant-agree-on-terms-cranky-flier\/"},"modified":"2025-02-04T12:14:28","modified_gmt":"2025-02-04T12:14:28","slug":"frontier-and-spirit-really-want-to-merge-but-they-cant-agree-on-terms-cranky-flier","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=67802","title":{"rendered":"Frontier and Spirit Really Want to Merge, but They Can\u2019t Agree on Terms \u2013 Cranky Flier"},"content":{"rendered":"


\n<\/p>\n

\n

For three years now, Frontier and Spirit have been trying to merge. Oh sure, there was that little distraction when Spirit ditched Frontier for JetBlue, but the love never stopped burning in the background. It sounds like talks started to heat up again recently, but now, it has gone cold once again because they can\u2019t agree on what Spirit is worth. (Spoiler alert: Spirit thinks it\u2019s worth a lot more than Frontier does.)<\/p>\n

\n
\"\"<\/figure>\n<\/div>\n

Back in February 2022, Frontier and Spirit agreed to merge<\/a> and all seemed right in the world. Frontier shareholders would get 51.5 percent of the combined company with Spirit getting 48.5 percent. For each share they owned, Spirit shareholders would get 1.9126 Frontier shares and $2.13. That was worth about $2.8 billion considering the share price at the time.<\/p>\n

When JetBlue tried to blow up this plan, Frontier ended up raising the cash piece to $4.13 per share, adding another $200+ million in value. Despite Spirit\u2019s management pleading for shareholders to take the deal, they would not. They chose JetBlue, and as we know, the Department of Justice (DOJ) shot that down and it all fell apart. <\/p>\n

The time that passed was not good to Spirit. The airline was bleeding money and shrinking, and it was barreling toward bankruptcy. Apparently last summer, Frontier saw this and decided to take another run at a merger at a greatly reduced value.<\/p>\n

The airlines disclosed in an SEC filing<\/a> that last summer\u2019s discussions involved Spirit stakeholders getting only 26.5 percent of the combined company plus $580 million paid toward debt. Spirit said at the time that its bondholders weren\u2019t happy with that, so nothing happened. But then in November, Spirit ran out of time and filed for Chapter 11 bankruptcy protection.<\/p>\n

Now with Spirit in bankruptcy, Frontier decided it was a good time to try and make a run once again before the airline exited on its own. This time, with Spirit in bankruptcy, it had a further revised offer. Can you guess which way it was revised?<\/p>\n

The new offer was for Spirit\u2019s various stakeholders to get a mere 19 percent of the combined company. In addition, Frontier would put in $400 million toward debt, but there\u2019s a catch. This plan requires Spirit\u2019s creditors to issue $350 million worth of debt to pay off the debtor-in-possession financing used in bankruptcy. Oh my, how the mighty have fallen.<\/p>\n

Spirit\u2019s response to this was a hearty middle finger. Actually, it didn\u2019t start off that strong. In a letter, the airline said it absolutely sees a lot of merit in the combination but also\u2026 this offer is a joke. The airline had a ton of questions about details, but in general, this sums it up well:<\/p>\n

\n

\u2026we have discussed the new Frontier proposal with the advisors to our bondholders as contemplated by your letter and required by our restructuring support agreement. We are told they believe your current proposal is so insufficient as not to merit a counter.<\/p>\n<\/blockquote>\n

Right, so, take that Frontier. Frontier hoped it could change Spirit\u2019s mind by putting together a nifty Powerpoint presentation<\/a>. There was some back and forth, but the two airlines were really talking past each other and not getting the answers that were truly needed. (You really should read the SEC filing<\/a> to get a feel for this.)<\/p>\n

Spirit basically left it this way at last check:<\/p>\n